A trader from Onyx says the Iran-war shock made oil markets violently dislocated, breaking normal liquidity and making outright Brent/WTI trading far less reliable than niche spreads, time spreads, and related contracts. The conversation focuses on how a large oil market-making business navigates extreme volatility, reads positioning, and builds an information edge from visibility, brokers, and client flow.
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Greg, a trader/co-founder at Onyx, argues that the recent Iran-war-driven oil move has been unusually chaotic and hard to trade. He says outright Brent and WTI became poor tools for most participants because bid/offer widened sharply, correlations broke down, and intraday swings were so large that traders could make and lose a year’s P&L in a day. In his view, the right response was to strip out discretionary overlays, return to core liquidity provision, focus on fair value across the curve, and trade relative-value expressions like time spreads and correlated contracts rather than outright direction. He describes a market where physical disruption, financial hedging, and political signaling all feed into price formation. …
Near term, the actionable read is that oil is still a liquidity and microstructure trade rather than a clean macro trade; outright longs/shorts are risky while spreads, options, and after-hours flow deserve more attention. Any headline that forces exchange or policy action could trigger another gap move.
Over the next few weeks, the more likely path is a messy re-pricing as hedgers, producers, refiners, and airlines rebalance exposure and the curve slowly re-anchors. If spread behavior and bid/offer improve, the market can transition back toward normal relative-value conditions; if not, volatility remains the dominant regime.
Structurally, the transcript argues that energy has become a financialized market infrastructure game, where data, access, and liquidity provision are durable sources of edge. The lasting risk is not just price direction but the possibility that policy makers interfere with the contract machinery itself, changing how the market functions.
Outright Brent/WTI trading is the wrong way to handle this kind of Iran-war shock because liquidity and bid/offer quality broke down.
He repeatedly says outright price trading was very difficult and that spreads were better tools than directional exposure.
The best way to trade the episode was through niche contracts, time spreads, and relative value rather than discretionary direction.
He says the firm returned to fair value work, manual curve construction, and correlated contracts to back out of liquidity.
Hedging and margin stress were severe enough that some traders and firms likely blew up or were forced out of positions.
He describes huge margin calls, people getting the tap on the shoulder Monday morning, and firms losing or defaulting on positions.
How can listeners make sense of the recent oil market turmoil?
The guest says the situation is unprecedented and extremely hard to trade. He explains that liquidity broke down across Brent, WTI, and related contracts, with bid-ask spreads widening sharply and price swings becoming violent enough to blow up positions.
What parts of the oil trading process are still within a trader's control during chaos?
He says the first step is to strip out the discretionary overlay and return to the core market-making model. In practice, that means focusing on fair value, manual price discovery, and trading the dislocations in front of them rather than trying to speculate on direction.
How do you even begin to analyze what fair value is and come up with a price when something like this has never happened before?
The guest explains that they start from Friday night's closing indications as a baseline. They leverage relationships with brokerage firms and dark pool liquidity since the market is barely electronic. Their traders draw on experience with how contracts, curves, time structures, and clients behave during big moves. With 20-50% market share in some contracts, they know client positioning and weak/strong parts of the curve. They use the weekend to analyze historical parallels (e.g., naphtha's sensitivity to Iran). They also note that extreme price moves instantly change economics for refiners, producers, shippers, and airlines, triggering hedging activity that further shapes the market.
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